The first quarter of 21st century wasn’t great for investors. The next needs an AI boost | Nils Pratley
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Debt, demographics and geopolitics aside, swing factor is whether artificial intelligence can revolutionise productivity. The first quarter of the 21st century is almost up, assuming one regards 31 December 1999 to have been the last day of the last millennium (non-partying pedants insist the date actually fell on the final day of 2000). It is the cue for analysts at Deutsche Bank to remind investors how much can change in the course of 25 years, in this case from the days when Nokia phones and fax machines, rather than iPhones and Amazon, were everyday features of life.
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Here’s one jaw-dropper: back in sunny days of 1999, there was a live debate as to when the US would pay down its entire stock of government debt. The Congressional Budget Office (CBO) reckoned the glorious day would arrive sometime in 2013. In reality, borrowing headed in the other direction almost immediately – and the US debt-to-GDP ratio is now above 100%. The CBO reckons annual deficits will take the ratio to 160% by 2050.
In similar fashion, delusional dotcom thinking at the turn of the century provoked ridiculous speculation that the stock market was heading for the moon. A book called Dow 36,000 became a bestseller, predicting that the Dow Jones industrial average, then about 10,000, would hit the named level “within a few years”. It took 22 years.
Deutsche calculates that, for stock market investors, the quarter century wasn’t much to shout about. US equities have left most other markets – including the UK – for dust, but they recorded their second-worst performance in the nine quarter centuries since 1800 with a 4.9% return above inflation. That is despite the increase in recent years from dominant tech superstars such as Apple and Nvidia.
